Year kicks off with rising inflation concerns
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Why are inflation concerns rising at the start of 2025 and how are bond yields reacting?
A new year, a new series of the morning call, and we start the year with, well, President Biden still sitting in the White House, but for one week only. Uh we see rising concerns about persistent inflation and an Aussie dollar that seems to be weakening along with currencies the world over as the US dollar goes from strength to strength. How long can that last for? And with the new president from next week, we can expect the unexpected this year. So welcome along. It's Monday, it's the 13th of January 2025. It's the morning call from Nab. Good morning. So here we go. A new year on the morning call. Bond yields are rising. Inflation concerns are higher than they were at the end of last year. In fact, in the last week we saw ten-year treasury yields up over sixteen basis points.
But the concern is Australia, where yields rose twenty-three basis points, and the UK up almost twenty-five basis points last week. In fact, in the last week we saw the Aussie being one of the weaker currencies down one point one percent against a rising US dollar. The Kiwi dollar Down one percent as well, but the pound did worse, losing one point seven percent last week against a US dollar that rose naught point six percent on the DXY. The DXY is now almost one hundred and nine point seven. That is two point seven percent in the last month. It's the strongest it's been since november twenty twenty two. Meanwhile, equities have not got off to a good start. In the States, the Russell two thousand was down three and a half percent last week, the Nasdaq lost two point three percent, one point.
nine percent lower for the S P.
How is the weakening Australian dollar linked to a stronger US dollar and global currency moves?
But the ASX two hundred was up half percent. The DAX managed a one point six percent climb, although on Friday it was down just about everywhere around the world. And meanwhile gold is rising, so is Brent WTI uh was up three point six percent last week as well. It's now almost up to seventy six sixty. Uh when we finished just before Christmas it was struggling to stay much above seventy. And gold is now above two thousand seven hundred US dollars. That's up five and a half percent in the last week. So it is the thirteenth of January. It's a a week out from the inauguration of President-elect Trump in the United States. But the moves we've been seeing more to do with this concern about the persistence of inflation.
Here's Nab's Rayattal with me this morning. So inflation worries back on the agenda and look I guess part of that is because we saw very strong payrolls numbers in the US last
Yes, good morning, Phil, and uh happy new year and uh to you and also all our listeners. Nice to be back. Um as you say, it is you know inflation concerns are clearly there and they're coming through from a lot of the Fed speak that we've had um in the last week or so. Um probably the one I'd highlight is is Jeff Schmidt from the Kansas Fed. He sort of said, Well, I favor a gradual approach to easing, but the but the data has to materially change on a sustained basis to just That and that does reflect that um apparent stickiness that we're seeing in some of those core inflation measures towards the end of last year. But you know, the employment report really kept a week of um, you know, concerns that uh concerns or um hopes if you like that the economy really isn't slowing down, and with that that inflation pressures um are going to be persistent.
So non farm payrolls up what, two hundred and fifty six thousand? In December, very minor, excuse me, minor revisions to the previous couple of months, and as much of a surprise also, the unemployment rate actually ticking down. So I think from a market reaction point of view, it was as much to do with that downtick in the unemployment rate to 4.1 as the as the sort of 100K plus upside surprise on non-farm payrolls. And you know, the only redeeming feature, if that's what you want to
What is driving the recent rise in gold prices and the slump in equity markets?
Call it was that you know hourly earnings did tick down a little bit in annual terms, three point nine percent against um four percent last time and four percent expected. But um but you've still got reasonably robust um earnings growth there, although if productivity uh is still well in positive territory as it seems to be in the US, I don't think that's a concern from an inflation point of view from the Fed standpoint.
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Chapters
8 chapters
1
Why are inflation concerns rising at the start of 2025 and how are bond yields reacting?
0:00–1:23
2
How is the weakening Australian dollar linked to a stronger US dollar and global currency moves?
1:23–3:26
3
What is driving the recent rise in gold prices and the slump in equity markets?
3:26–6:08
4
How did the surprisingly strong US payroll numbers affect Fed expectations and rate‑cut pricing?
6:08–8:48
5
What do the latest University of Michigan consumer sentiment figures reveal about inflation expectations?
8:48–11:29
6
Why are Canadian labour market surprises influencing expectations for Bank of Canada rate cuts?
11:29–13:32
7
Can softer‑than‑expected Australian CPI and retail sales delay a February RBA rate cut?
13:32–16:01
8
What market risks are ahead of the US presidential inauguration and upcoming Treasury Secretary hearing?
16:01–16:52